Amazon’s fourth-quarter earnings on Thursday beat analyst expectations, but its revenue fell short of estimates. Holiday season sales did not bring in expected revenue, as Reuters estimated the company would earn $44.68 billion in revenue, while it actually earned $43.74 billion.
Amazon has invested heavily in infrastructure and projects to meet soaring consumer demands as online shopping continues to grow. Amazon’s growth has negatively affected traditional retailers, as brick-and-mortar stores continue to close by the hundreds.
Morningstar senior retail analyst RJ Hottovy explained on CNBC’s “Closing Bell”, “Part of the revenue miss might be the ongoing shift to being a third party market place. When that happens, you’re not getting as much of the revenue in there.”
Amazon chief financial officer Brian Olsavsky also noted that the company offers promotions to bring prices down, a “cost of doing business.” Active sellers that fulfill delivery through Amazon grew 70% in the last year, according to Olsavsky.
On a conference call, the company revealed that Amazon’s biggest investments were the new fulfillment centers built in the second half of 2016 (23 in total), original content available on its video streaming service, its Alexa and Echo devices, as well as expansion into India.
CEO Jeff Bezos focused on the company’s Prime membership program, noting “tens of millions of new paid members joined the program in just this past year.”
Bezos has bundled several more services into the membership, he said in a statement. “Prime members can now choose from over 50 million items with free two-day shipping– up 73% since 2015. Prime Video is now available in more than 200 countries and territories. Prime Now added 18 cities, which means millions of more members now get one and two-hour delivery.”
The company’s cloud-computing unit, Amazon Web Services, has seen shares rise by almost 10% over the past three months. Still, the platforms have had 7 price cuts in December alone.
According to Olsavsky, “That’s going to be a constant in this business. We’ve been pretty clear that this business is about creating new functionality for customers, giving price cuts, and then working on the operating efficiencies.”